U.S. retail sales see modest growth in August

Cautious consumers are buying cars, furniture electronics but not much else

Electronics were one category of goods that Americans were buying in august, along with cars and furniture. Sales of most other goods, including sporting goods and clothing, decreased that month. (Paul Sakuma/Associated Press)

Americans bought more cars, furniture and electronics in August, but held back on most other retail purchases.

The Commerce Department says spending at retail businesses rose 0.2 per cent last month, the smallest gain in four months and about half of what economists had expected. Excluding volatile spending on autos, gas and building supplies, sales increased just 0.2 per cent, or less than half July's 0.5 per cent gain.

The modest retail sales gain suggests consumers may be growing more cautious about spending, which could slow economic growth in the July-September quarter. Retail sales are closely watched because they're the government's first look at consumer spending, which accounts for 70 per cent of economic activity.

Sales of autos and furniture both jumped 0.9 per cent. Electronics and appliance sales rose 0.8 per cent. But clothing sales dropped 0.8 per cent and sporting goods sales also fell.

Auto sales strong

Last week, automakers reported that their sales in August topped 16 million at an annual pace for the first time since November 2007, just before the recession began. Toyota, Ford, Nissan, Honda, Chrysler and General Motors all posted double-digit gains over last August.

But many retailers have said in recent weeks that shoppers have been reluctant to spend freely for back-to-school shopping. According to a tally of 10 retail chains by the International Council of Shopping Centers, sales rose 3.6 per cent last month. That's down from a six per cent gain for in August 2012.

Job gains have been steady this year. But the pace of hiring has been too weak to rapidly lower the unemployment rate, which is 7.3 per cent four years after the 2008 recession officially ended.

Americans are also seeing little growth in their wages. At the same time, they are grappling with higher taxes this year. The combination has limited their spending power and kept the economy from accelerating.

In July, consumer boosted their overall spending just 0.1 per cent after their income rose by the same sluggish amount.

The tepid July gain in consumer spending has fueled worries that growth could slow in the July-September quarter to an annual rate of roughly two per cent. That would be down from the 2.5 per cent annual rate from April through June.

The markets reacted positively to Friday's news since the lacklustre gains might delay the winding down of the Federal Reserve's economic stimulus program.

The board of governors of the U.S. central bank meet next week, and many are expecting they will give a clearer indication of when they might turn off the taps of the $85 billion US a month bond-buying program.